When the Portland Trailblazers announced their Jersey Patch deal with crypto cashback platform StormX last year, the deal was hailed as paving the way for the future of cryptocurrency brands. A little over a year later, the two organizations prematurely ended their partnership just weeks before the 2022 NBA season began.
The repercussions from the failure of the first crypto jersey patch deal in the NBA show how the once hottest crypto category across professional sports continues to be a mess. As the cryptocurrency market continues its downward trajectory, exacerbated by skyrocketing inflation, cryptocurrencies, exchanges and neighboring companies have had to reassess their investments in sports marketing.
“The deal will have to be dissolved,” Peter Laatz, IEG’s global managing director, said in a video interview. “And the first place companies go is toy stores that deal with sponsorships and advertising dollars.”
The cryptocurrency category exploded as sports teams and leagues around the world craved capital to deal with severe losses from the pandemic and could not resist the influx of cash. And it was worth paying hundreds of millions of dollars to get it for a cryptocurrency company that wanted to grab market share and increase brand awareness. Crypto.com, FTX, and Coinbase are his three crypto companies that in 2021 made the IEG’s top 100 sponsorship list (based on sponsorship fees).
The crypto sponsorship category has been adopted by the technology-minded NBA. According to IEG, the league hit a record $1.6 billion in sponsorship revenue for the 2021-22 season, with crypto brands spending more than $133 million last season alone. But football clubs around the world hold the biggest deal volume among all sports, including Inter Milan’s deal with fintech blockchain firm Zytara Labs worth $100 million.
Crypto.com leveraged sports for brand recognition and agreed to pay $700 million (over 20 years) to name the arena formerly called Staples Center. A cryptocurrency trading platform that trades with the Philadelphia 76ers and UFC has spent his $144 million, a sector-high, on sports-wide partnerships, according to GlobalData.
However, some deals are now contractually terminated or adjusted. These results not only affect the two partners, but also have ripple effects for the marketing agency, which earns commissions on deals. The recession has also increased scrutiny among team owners who are demanding far more due diligence when approached by crypto-related firms, especially in the current climate of global economic uncertainty. If the owner is interested in receiving calls, they will likely ask for cash upfront.
Lartz says the cryptocurrency sponsorship market is reminiscent of the dot-com bubble, when companies invested aggressively in sports, signed naming rights deals, and branded stadiums across the country. Longtime Sports Sponsorships One of his matchmakers said the recent stagnation in crypto-related partnerships is also reminiscent of the daily fantasies of his sport. DFS was launched in his 2013, but increased government regulation has hampered its growth, rendering the organization inoperable in many states. Some teams decided not to renegotiate their contracts with DFS operators, while others worked hard with their partners.
A similar dance was played between corporate partners at the height of the pandemic. Several crypto-related companies are now seeking relief and payment delays.
“Other than the big companies, I doubt these small businesses are paying these sponsors. [fees]especially over the period they signed the contract,” Conrad Wiacek, GlobalData’s head of sports analytics and consulting, said in a telephone interview.
Collapsed crypto lender Voyager Digital, once touted by Dallas Mavericks owner Mark Cuban, is one cryptocurrency struggling to maintain sports sponsorships. StormX and Terraform Labs are also included in the list of companies whose offers were never delivered or whose contracts were later unsettled.
From the beginning, the NFL has taken a cautious approach to this category. The league recently allowed teams to sign sponsorship deals with exchanges, wallets, and neighboring companies, but prohibits them from facilitating the use of cryptocurrencies.
Experts believe that consolidation among cryptocurrency companies will be one of the inevitable consequences of this recession, but many believe that well-managed and well-capitalized companies will weather the storm and be prepared. We believe we are well positioned to thrive in the long term if we can. Redeploy.
“I don’t think the crypto sector will recover in the way we want it to,” added Wiacek. “Does that mean it’s no longer a viable category? I wouldn’t say so…but it will be interesting to see if it recovers.
While the recession continues to hit the crypto industry and its investors hard, there are encouraging signs of a potential recovery. By utilizing blockchain and providing clients with access to crypto assets.
“Once things get off the ground, the foundation is there and things are going to get better for some of these companies to succeed,” said Bob Brenfleck, senior vice president of commercials at Sports Five, in a phone interview. ” he said.
Brenfleck points out that most of the crypto companies that have invested heavily in sports have remained trading despite the recession. He is bullish that by late 2023, the sector will rebound again and new players will enter the space as the once-hot category regains its footing.
“We’ve seen this before, so we knew there was going to be a cooling period, and this is no exception,” he added. , move forward.”
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